Mortgage Crisis is quickly becoming a tax crisis

Municipalities with high rates of foreclosure are struggling to figure out how to deal with falling tax revenues.

For instance, Stockton, Calif., draws 43 percent of its revenues from property and sales taxes. Home prices in the community have been cut in half since the end of 2006, says real estate research firm MDA DataQuick. The city faces an 11 percent budget shortfall, forcing it to consider what city budget analyst Joe Maestretti calls “draconian” cuts.

In Cape Coral, Fla., the police and fire departments anticipate staff cuts of 9 percent and 11 percent, respectively, due largely to lowered property tax revenue, spokesman Michael Jackson says.

Democrats in the California Assembly sent a letter Friday to Gov. Arnold Schwarzenegger, urging him to address California’s high rate of foreclosures as it affects the state budget.

“Four billion dollars of last year’s budget deficit is attributable to the foreclosure crisis and billions more will be lost this year if nothing is done to address this crisis,” the letter said.

Source: USA Today, Julie Schmit, and KVTU.com

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